Obama Push to Cut Health Costs Faces Tough Odds

This is a historic day, a watershed event, said the president, after a meeting with a range of leading health-care providers.Credit
Doug Mills/The New York Times

WASHINGTON — President Obama engineered a political coup on Monday by bringing leaders of the health care industry to the White House to build momentum for his ambitious health care agenda.

Mr. Obama pronounced it “a historic day, a watershed event,” because doctors, hospitals, drug makers and insurance companies voluntarily offered $2 trillion in cost reductions over 10 years. The savings, he said, “will help us take the next and most important step — comprehensive health care reform.”

Robert Gibbs, the White House press secretary, said Mr. Obama had told the health care executives, “You’ve made a commitment; we expect you to keep it.”

If history is a guide, their commitments may not produce the promised savings. Their proposals are vague — promising, for example, to reduce both “overuse and underuse of health care.” None of the proposals are enforceable, and none of the savings are guaranteed. Without such a guarantee, budget rules would normally prevent Congress from using the savings to pay for new initiatives to cover the uninsured. At this point, cost control is little more than a shared aspiration.

Still, the event was significant. There was something in it for Mr. Obama, and something for the industry — though not necessarily the same thing. Their interests overlap but do not coincide.

For Mr. Obama, the White House meeting was an opportunity to showcase his consensus-building approach, in contrast with the confrontational style of Hillary Rodham Clinton, who at this point in her husband’s first term attacked “price gouging, cost shifting and unconscionable profiteering” by the industry in a speech to union members.

Mr. Obama is not cracking the whip on the health care industry so much as wooing it, just as he said he would in the campaign.

For the health care and insurance executives, the savings initiative helps them secure a seat at the table where many decisions about their future will be made in the next year. They also ingratiated themselves with Democrats in the White House and Congress who are moving swiftly to reshape the nation’s health care system.

“We came together in a serious way a couple of weeks ago,” said David H. Nexon, senior executive vice president of the Advanced Medical Technology Association, one of the six health care industry groups that promised to lower costs. “Health care reform is moving very fast. We want to make sure it comes out in a way that’s workable and sustainable.”

Dennis Rivera, coordinator of the health care campaign of the Service Employees International Union, led efforts to bring the industry groups together, with help from Nancy-Ann DeParle, director of the White House Office of Health Reform.

The consensus-building approach has already yielded some results. Insurance executives have offered to end certain underwriting practices, like refusing to cover individuals with pre-existing conditions or charging women higher rates than men, and they have invited Congress to impose stringent, uniform federal regulation on their industry. But even as insurers and health care providers stand shoulder to shoulder with Mr. Obama in vowing to slow the growth of health spending, they oppose him on other fronts. For example, insurance companies are opposed to a new government-sponsored health plan, which Mr. Obama supports but insurers fear could drive them out of business.

Senator Charles E. Schumer of New York, the third-ranking Democrat in the Senate, welcomed the industry’s cost-cutting commitment as “a good-faith gesture.” But he said, “It does not mitigate the need for a public plan option in our health care reform bill.”

In addition, insurers and health care providers are lobbying strenuously against cuts in their Medicare payments that would produce savings of the type they profess to want. Insurers are fighting Mr. Obama’s proposal to cut payments to their private Medicare Advantage plans by a total of $176 billion over 10 years. Doctors are pleading with Congress not to cut costs at their expense, in particular by allowing a 21 percent cut in their Medicare fees scheduled to occur in January. Pharmaceutical companies and makers of medical devices worry that new products may have to pass a cost-benefit test before being approved for coverage under Medicare.

To fulfill Mr. Obama’s campaign promise of offering affordable coverage to all, cost control is a political, as well as an economic, necessity. By their own account, Democrats will have difficulty financing coverage for more than 45 million people who are uninsured. The task would be virtually impossible — and new social insurance programs would be unsustainable — if health spending continued to increase at the currently projected rate of 6.2 percent a year for a decade.

The industry says it can shave 1.5 percent off the annual rate of growth through voluntary efforts. But similar efforts to control health costs have been rolled out in the past, without much of a long-term effect.

Henry J. Aaron, a health economist at the Brookings Institution, said that when he heard the industry’s promises on Monday, “I had a Rip van Winkle moment, as if I had fallen asleep in 1977 and woke up again this morning.”

Mr. Aaron served in the administration of President Jimmy Carter, whose proposal for hospital cost controls prompted the industry to undertake a short-lived “voluntary effort.”

After President Bill Clinton proposed an overhaul of the health care system in 1993 and 1994, the growth of health spending slowed, only to surge a few years later.

Drew E. Altman, the president of the Kaiser Family Foundation, offered a historical perspective spanning nearly four decades.

Industry groups sounded constructive and positive on Monday, but the real test will come in a few weeks when lawmakers unveil detailed legislative proposals. “Will they still be supportive?” Mr. Altman asked. “Or will they revert to form and protect their turf?”

Rather than gambling on the answer, some lawmakers want to establish an enforcement mechanism, which would take effect if the industry’s voluntary steps did not slow health spending by a specified amount.